Powell did not explicitly say there would be more cuts in interest rates. But in his remarks to the House Financial Services Committee, he noted the Fed in June announced it "would act as appropriate to sustain the expansion".

That sent the S&P 500 surging past 3,000 points for the first time.

Edward Moya, analyst at Oanda, said Powell's comments underlined the clouds hanging over the economy.

Advertisement

Advertisement

"The economic outlook has not improved in recent weeks and that pretty much signals a rate cut" at the Fed's policy meeting on Jul 30-31, he said.

On the foreign exchange markets, the pound rebounded from more than two-year lows versus the dollar meanwhile, as official data showed Britain's economy returned to growth in May, with gross domestic product expanding by 0.3 per cent following a contraction of 0.4 per cent in April.

In Britain, "the pound caught some bid as the UK economy bounced back in May following the decline in April," noted Neil Wilson, analyst at Markets.com.

"But traders need to be careful as Brexit uncertainty remains the major drag on sterling."

Fed officials have helped spur a rally in world equities in recent weeks by taking an increasingly dovish or subdued tone regarding monetary policy, fuelling expectations they would cut borrowing costs sharply to support a stuttering economy.

Hopes for a deep reduction seemed to have been set back on Friday by data showing the US created far more jobs than expected in June.

But Powell told US lawmakers the case for lower rates "had strengthened" last month given the rising "crosscurrents" in the economy.

Elsewhere, oil prices jumped more than two percent after a closely watched industry report showed a massive drop in US stockpiles last week, while traders also cheered reports that Russian output fell in July to its lowest in nearly three years.

The developments provided a boost to the commodity, which took a hit earlier in the week as a stronger dollar added to ongoing worries about the trade war and soft global outlook.

Still, analysts said prices will remain volatile as investors weigh the trade row against geopolitical tensions in the Middle East.